Seemingly, every week, a new retail company is entering the retail media space. The most recent one is a huge one: Costco.
The company, which is known for its minimalistic marketing strategy, is finally joining its biggest competitors Wal-Mart and Target on the retail media playing field and looking to monetize its 70 million members.
Retail media networks (RMN) began as opportunities for retailers to sell ad space on their owned digital properties, which brands can purchase to reach their customers. It’s so popular and oversubscribed that retailers are now enabling brands to buy retail media ads on third-party sites, like external publishers, where they act as supply and demand. The latter is where retail media networks are expected to skyrocket.
Retail advertisers are the largest programmatic buyers on the 33Across Exchange, especially emboldened by opportunities brought on by cookieless buying. For example, retail advertisers grew their cookie alternative investments by 117% in Q4 2023.
To see its future, Costco only needs to look as far as Wal-Mart, whose early move into the retail media space created an advantage that translates to $3.4 billion per year. Retail media is expected to generate
$100 billion in sales by 2026. Industry estimates say that retail media is now 20% of overall ad spend.
Costco will be operating from a position of strength. Its members are fanatical and exhibit a high degree of confidence in the brand. Visitors browsing the company’s website will likely trust and want to interact with the ads that run on the site.
But it’s not just the big players. Everyone from Wawa to Wakefern Food Corp. to Lord & Taylor is among the 200 retailers that have launched their own media networks.
Why Retail Media is En Vogue
One reason why retailers love retail media: the margins. Retail media margins can be as high as 90% compared to the traditional 3%-4%. Why can retailers change the amounts they do for these spaces? Because they provide brands with rich first-party data. Customers need to supply a host of information to make purchases on retailer websites. That makes reaching those customers extremely lucrative for the retailers that offer that ability.
Of course, that first-party data becomes even more important in a world of cookie deprecation. In an arms race of targeting and measurement, retailers frankly have more first-party firepower than traditional publishers. In addition, a reasonable argument can be made that visitors on a retail media site are more inclined to buy than if they’re reading an article or watching a video elsewhere. This is regardless of whether they’re on a desktop or a mobile device.
Why retailers need to completely embrace cookieless
Retailers can offer brands retargeting and conversion tracking in a cookieless environment, thanks to their first-party data. Their contextual environment also provides opportunities to use non-personally identifiable data for enhanced targeting.
Additionally, there is fundamentally less competition for cookieless traffic right now. Too many companies, including retailers, are maximizing their programmatic spend on cookied inventory while it still exists and overlooking cookieless supply. Savvy programmatic buyers know that fewer bidders mean increased win rates and cheaper inventory.
Finally, the right partners can supplement whatever first-party data retailers have to provide cookieless measurement and retargeting. That’s why retailers have the opportunity to expand their RMN to external publisher sites. Those publishers are more than happy to work with RMNs on direct deals or private marketplace deals (PMPs) that value their cookieless traffic.
And, yet, too few are taking advantage
While the future is bright for retailers and their networks, they are not taking enough advantage of cookieless opportunities, due to a lack of understanding of what they can accomplish in that environment.
Combining these lower CPMs with higher win rates due to lower competition means that cookieless could quickly become a large and effective part of promotions and retargeting initiatives.
Retailers have a bright future ahead of them and are well-positioned to be advertising powerhouses. But to truly win, they need to work with the right identity resolution partners to ensure that first-party data matches up with publisher data.
RMNs are one of the best options to enable programmatic scaling without third-party cookies. And the time to take advantage is now. Cookieless inventory currently costs less than 40% of cookied inventory. But that won’t always be the case. Now is the time to scale from a position of power, and lead the charge into the cookieless future.
This original article was originally featured on Advertising Week.
